Local retailers hope for recovery in five years

Local retailers hope for recovery in five years

JAKARTA (JP): Local retailers, wilting from depressed market
demand amid the country's worst economic recession in over 32
years, are expecting a strong turnaround in only five years.

The executive director of the Indonesian Retail Merchants
Association (Aprindo), Kustarjono Projololito, said on Wednesday
the association predicted robust economic growth at the precrisis
level to restart in 2004.

"The economy will remain mired in the doldrums until 2003,
eroding the purchasing power of consumers and consequently
depressing market demand, " Kustarjono told reporters on the
sidelines of a seminar on the retail business.

Sinking sales volume, thin margins and constant threats of
security disturbances have assaulted the retail industry since
early 1998 when the full brunt of the financial meltdown lashed
the economy.

Kustarjono said retail sales turnover this year would likely
remain at last year's level of Rp 170 trillion, but soaring
prices of products could keep sales volume down by 40 percent.

Last year, sales volume dropped by 30 percent as higher prices
discouraged shoppers from opening their pocketbooks, he said.

Kustarjono said of the Rp 170 trillion rung up in sales last
year, only Rp 25 trillion was generated by department stores,
supermarkets, grocery stores and other modern retailers.

The rest was recorded by smaller retailers and vendors in
traditional markets.

Kustarjono said retailers survived mostly by slashing their
margins and cutting operational costs.

On average, retailers dealt with a 10 percent margin, but some
stores were forced to slash their margins to 2.5 percent to 5
percent to stay open, he said.

Security

Most retailers are concerned about a possible new wave of
social unrest and riots amid simmering political tension in the
run-up to the June general election.

Fatal riots last May, which contributed to president
Soeharto's resignation, caused Rp 661.52 billion in total losses
to Aprindo members.

Kustarjono said insurance firms had failed to settle most
claims by Aprindo members exceeding Rp 20 billion, although
claims on lesser amounts were paid.

Aprindo chairman Steve Sondakh said local retailers were
spending more on beefing up security at their properties, which
meant additional operational costs.

Most of the additional expenditures went to deployment of
members of the military to guard the premises.

The director of human resources and public relations for large
retail chain Ramayana, Setyadi Surya, said his company now spent
five times more on security than before the May riot.

" Our budget for security used to be in the range of tens of
million of rupiah every month. Now, it reaches hundreds of
millions."

Twelve Ramayana stores were burned during the riots, and 14
others were looted and vandalized, incurring damage of Rp 150
billion. Insurance firms have not paid compensation.

The 14 looted stores have reopened, but operations have yet to
resume at the burned businesses.

Setyadi said Ramayana planned to reopen four of the 12 burned
stores with additional investment of Rp 100 billion.

Reconstruction work is continuing on stores in Tangerang (West
Java), Cengkareng (West Jakarta), Tanjung Priok (North Jakarta)
and Ciputat (South Jakarta), he said.

"They will reopen after June, depending on the election
outcome," he said.

With the reoperation of the stores, the company expects sales
to rise to Rp 1.25 trillion this year from Rp 1 trillion last
year, Setyadi said. (das)